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22 September, 02:20

The Engine Division provides diesel engines for the Motor Home Division of a company. The standard unit costs for Engine Division are as follows:

Direct materials $ 600

Direct labor 1,200

Variable overhead 300

Fixed overhead 150 Market price per unit 2,730

What is the best transfer price to avoid transfer price problems?

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  1. 22 September, 03:06
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    The best transfer price to avoid transfer price problems is $2,310

    Explanation:

    Transfer Price = Variable cost + Fixed Fee

    Variable Cost = Direct Material + Direct labor + Variable Overhead

    = 600 + 1,200 + 300

    = 2,100

    Transfer Price = Variable cost + Fixed Fee

    = 2,100 + 210

    = $2,310

    Therefore, The best transfer price to avoid transfer price problems is $2,310
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